US - Social Security Administration and New Year’s Day rules


The way the Social Security Administration treats New Year’s Day can dramatically impact benefits, The Motley Fool reports.

More than 60 million Americans reportedly receive Social Security benefits yet many do not understand how the system works and some of the strange the quirks of its rules. One of the quirkier rules governs how New Year’s Day affects benefits.

Ordinarily, Social Security treats different holidays similarly. Retirement benefits, as an example, are paid on the second, third or fourth Wednesday of the month. In years when holidays occur on a Wednesday (Veterans’ Day etc.) payments are made a day earlier, on a Tuesday instead.

Supplemental Security Income is usually paid to recipients on the first of the month. When the first falls on a weekend or holiday payments move to the closest working weekday. Generally December 31, in the case of New Year’s Day, but payments may move forward two days or more.

 

January 1 birthday rule

If your birthday is on January 1, the Social Security Administration will treat your birthday as occurring in the previous year. Treating you the same as anyone born on December 31.

If you were born on January 2 your birthday will occur in the ‘correct’ year.

This rule matters because those with January 1 birthdays will be dealt with as though they are a month older. Potentially giving them a higher monthly SS payout than someone with a January 2 birthday, despite the single day difference.

For every month early someone claims benefits, they lose between 5/12 and 5/9 of a per cent of their full retirement age monthly payout. Treating recipients as a month older lets them avoid that incremental loss of benefits. After retirement age benefits increase by two-thirds of a per cent each month. Potentially giving an extra two-thirds of a per cent benefits bump.

Impact

The wider impact of the January 1 rule is on how full retirement age is worked out. By SSA rules, those born from 1943-1954 have a full retirement age of 66. For those born in 1955, 66 and 2 months is the full retirement age.

Because people born on January 1, 1955, are treated as though they were born in 1954, they will avoid the two additional months and their impact on monthly benefit amounts.